The group home landscape in Prescott continues to shift, city officials say, as more and more homes shut down, consolidate and change hands.

The predicted end result: The total homes in Prescott will drop to as low as one-third the number at the 2015/2016 peak.

Prescott Planning Manager George Worley reported to the Mayor’s Ad Hoc Committee on Structured Sober Living Homes this past week that the city expects the number of group homes to stabilize at about 55 to 65.

That would be a dramatic drop from the 170 total that the city reported to the committee about a year ago. Some estimates at the time were as high as 200.

New regulations

Since then, a number of things have happened to affect the industry. First, the Arizona State Legislature approved a bill in early 2016 that allowed local governments to more strictly regulate the homes.

The new state law went into effect in August 2016 and led to approval of a new city ordinance in the fall of 2016. The ordinance, which went into effect Jan. 1, 2017, included new requirements on everything from registration to training to staffing levels.

Meanwhile, the health-insurance industry had also launched investigations into the claims coming from Prescott’s sober-living homes.

In August 2016, Dan Kreitman, director of a special investigative unit for the Centene Corporation, appeared before the ad hoc committee and reported that a team of investigators was looking into allegedly fraudulent practices of many of Prescott’s sober living homes.

Kreitman estimated at that time that as many as 100 homes in the Prescott area had closed their doors as a result of the company’s actions.

Susan Padilla, director at Prescott Sober Living, said the increased scrutiny has helped her industry.

“I do think it’s helped quite a bit, it brought the recovery community together, more than it was.”

Declining numbers

By summer of 2016, the city estimated that the number of sober-living homes in Prescott had dropped to about 110 — a combined result of the changes in the insurance industry, and the pending city regulations.

Then, with the Jan. 1 implementation of the city’s business license and structured sober living regulations, the numbers dropped again, according to the city.

“In the three months since the initiation of those new regulations, another 44 homes have closed or will close soon, or are no longer structured sober living homes,” Worley’s presentation stated.

He noted that city inspectors had confirmed that the homes were no longer being used as group homes, and he presented a map showing which of the homes had closed.

Overall, Worley said, 38 homes have so far submitted applications for a city license, while another seven homes have started the registration process. Another four homes are suspected of being group homes but have not been verified.

Also of the total, Worley said 15 homes have been licensed through the state and are not subject to the city’s inspections, while nine have been determined to be group homes of another type, and not structured sober-living homes.

“In all, we know of 64 structured sober living homes, with 49 being subject to city regulation,” Worley’s presentation stated. He told the committee: “We expect it to level out somewhere between 55 and 65.”

With the homes averaging between six and eight residents, Worley said the total sober-living residents in Prescott at any time would be about 450. “That is just over 1 percent of Prescott’s population of 42,000,” he added.

Industry shifts

Central to the changes in Prescott’s group home industry were a number of consolidations and changes in ownership.

For instance, Worley said the Royal Life Services company had recently purchased several of Prescott’s major group home companies, including Chapter 5 and Solutions.

Peter Thomas, the former executive director of Chapter 5, told the committee that new owner Royal Life Services had taken over management of the facilities, and that his last day on the job was March 31.

Thomas, who served as an industry liaison to the ad hoc committee, commended the city for its handling of the group home situation.

Worley told the committee that Royal Life Services has been in contact with the city about moving much of its operation to a medical-office complex at 1040 Whipple Street, near the Miller Valley School building.

As that occurs, he said he expects the former homes used by Chapter 5 to be “repurposed as residential homes.”

The presentation stated: “Two of the larger structured sober-living home operators in Prescott have begun, or expressed a desire to, eliminate the use of single-family homes from their treatment models in favor of consolidating their clients in multifamily settings. If this trend continues, the number of structured sober living homes in residential neighborhoods will further decline.”

In conclusion, Worley called the ongoing changes in the industry “a fairly significant trend.” While the city’s new regulations played a major role in that trend, he added, “A big part of it was the change in the insurance industry.”